Vitalik Buterin has a new post about an interesting theoretical attack against Bitcoin. The idea relies on the assumption that the attacker can credibly commit to something quite crazy. The crazy thing is this: paying out 25.01 BTC to all the people who help him in his attack to steal 25 BTC from everyone, but only if the attack fails. This leads to a weird payoff matrix where the dominant strategy is to help him in the attack. The attack succeeds, and no payoff is made.
Of course, smart contracts make such crazy commitments perfectly possible, so this is a bit less theoretical than it sounds. But even as an abstract though experiment about decision theories, it looks pretty interesting.
By the way, Vitalik Buterin is really on a roll. Just a week ago he had a thought-provoking blog post about how Decentralized Autonomous Organizations could possibly utilize a concept often discussed here: decision theory in a setup where agents can inspect each others' source code. It was shared on LW Discussion, but earned less exposure than I think it deserved.
EDIT 1: One smart commenter of the original post spotted that an isomorphic, extremely cool game was already proposed by billionaire Warren Buffett. Does this thing already have a name in game theory maybe?
EDIT 2: I wrote the game up in detail for some old-school game theorist friends:
The attacker orchestrates a game with 99 players. The attacker himself does not participate in the game.
Rules:
Each of the players can either defect or cooperate, in the usual game theoretic setup where they do announce their decisions simultaneously, without side channels. We call "aggregate outcome" the decision that was made by the majority of the players. If the aggregate outcome is defection, we say that the attack succeeds. A player's payoff consists of two components:
1. If her decision coincides with the aggregate outcome, the player gets 10 utilons.
and simultaneously:
2. if the attack succeeds, the attacker gets 1 utilons from each of the 99 players, regardless of their own decision.
There are two equilibria, but the second payoff component breaks the symmetry, and everyone will cooperate.
Now the attacker spices things up, by making a credible commitment before the game. ("Credible" simply means that somehow they make sure that the promise can not be broken. The classic way to achieve such things is an escrow, but so called smart contracts are emerging as a method for making fully unbreakable commitments.)
The attacker's commitment is quite counterintuitive: he promises that he will pay 11 utilons to each of the defecting players, but only if the attack fails.
Now the payoff looks like this:
Defection became a dominant strategy. The clever thing, of course, is that if everyone defects, then the attacker reaches his goal without paying out anything.
So, I did not forget about that particular case. In my particular brand of cryptoeconomic analysis, I try to decompose cooperation incentives into three types:
I often group (2) and (3) into one category, "altruism-prime", but here we can separate them.
The important point is that category 1 incentives are always present as long as the protocol specifies them, category 2 incentives are always present, but the size of category 3 incentives is proportional to the "probability of being pivotal" of each node - essentially, the probability that the node actually is in a situation where its activity will determine the outcome of the game.
Note that I do not consider 49/50 Nash equilibria realistic; in real massively multiplayer games, the level of confusion, asynchronicity, trembling hands/irrational players, bounded rationality, etc, is such that I think it's impossible for such a finely targeted equilibrium to maintain itself (this is also the primary keystone of my case against standard and dominant assurance contracts). Hence why I prefer to think of the probability distribution on the number of players that will play a particular strategy and from there the probability of a single node being pivotal.
In the case of cryptoeconomic consensus protocols, I consider it desirable to achieve a hard bound of the form "the attacker must spend capital of at least C/k" where C is the amount of capital invested by all participants in the network and k is some constant. Since we cannot prove that the probability of being pivotal will be above any particular 1/k, I generally prefer to assume that it is simply zero (ie, the ideal environment of an infinite number of nodes of zero size). In this environment, my usage of "dominant strategy" is indeed fully correct. However, in cases where hostile parties are involved, I assume that the hostile parties are all colluding; this maximally hard double-standard is a sort of principle of charity that I believe we should hold to.